From Bad to Better - Likely Acquisition of DRR Assets By Newscom A Good Thing

There were just a few outcomes for what remains of Digital Railroad, or so I thought. One was closing it's doors, another, being acquired by PhotoShelter, then there was potential suitor liveBooks, Mark Ippolito, and then the never-was-gonna-happen Getty and Corbis.

What hadn't crossed my radar was Newscom, when rumor spread Thursday evening of a company with cash to buy the assets. A number of people got calls from me, including several at Diablo Management. I wrote in an e-mail to them :"I have heard that Digital Railroad was acquired this evening in a cash transaction, and I would like, at the very least, to know if you can confirm that." The response I received Friday morning, first thing, was "No comment regarding your assertion. We will however have some news later in the day."

When they wrote in their statement, describing the suitor, but strangely, not naming them, I pondered who fit that bill. Daryl Lang, over at PDN had the only viable name to fit that bill (Is Newscom about to aquire Digital Railroad Assets?, 10/31/08), and I have to agree with him.

So, what exactly does this mean?

(Continued after the Jump)

Like the Phoenix rising from the ashes, this is a good thing. No, let me get that right, this could be a great thing. This entire piece will be a dissection of the problems that the other suitors likely would have had, and how Newscom is great for everybody, save one.

First to PhotoShelter. The only real reason PhotoShelter would have benefited from the aquisition would be because they could have used the aquisition to get 1,400+ new active photographers. To date, several hundred have already made the switch. However, the demands by WTI for a price-point made that deals' value minimal, at best. Further though, PhotoShelter wasn't really focused on agencies to use ther platform (although they have the capability to take them, if they wanted to). So, for PS, it was all about new members.

Next to liveBooks. LiveBooks could have used the technology as an add-on to their current capabilities, but the question first was of valuation and then of integration. Following that was the concern about the debts that were outstanding. There was the $1m to WTI, then right around $80k to another lender, and then $120k or so owed to photographers, and taking on those debts made this deal unpalatable, for sure.

Next to Ippolito. Mark would have been a good fit, except that people would have been leary that he could keep it going, and they would associate him with the unexpected failing that just happened, and lastly, he likely had a hard time coming up with the money that Diablo/WTI wanted.

Getty and Corbis already have platforms they are happy with, and for them, it was likely a question of acquiring several million more images, but then again what to do with all the agency deals that were there. So they too, not a good fit.

Then, the morning of October 30th, Newscom sent out this missive:

Dear Former Digital Railroad Customer:

With the unexpected closing of the Digital Railroad business, Newscom and Mainstream Data have been receiving many calls from photo agencies and professionals like yourselves asking if there is anything we can do to help them – and do it quickly. The answer is Yes!

Mainstream provides premier hosting and distribution services, software development, and web platforms for prominent photo agencies including Thomson Reuters, Bloomberg, the European Pressphoto Agency, the German Press Agency (DPA), the Dutch Press Agency (ANP), the Spanish Press Agency (EFE), the Portuguese Press Agency (Lusa), UPI, and many photo plus video agencies like Splash News, AdMedia, Featureflash, Sipa Press, Ace Pictures, INF, and Jupiterimages. Moreover, unlike some of the other companies offering refuge for Digital Railroad customers, Newscom and Mainstream have been key players in this business for more than twenty years, are profitable, and offer you the security and functionality you need to be successful and to be able to sleep at night.

We provide both Internet FTP push delivery and hosted web portals for delivery of your photographs to subscribers, and we also operate the largest multi-agency marketplace for digital media in the world (Newscom).

Our managed FTP service is called MediasFTP; it is our automated FTP distribution system that reads the IPTC data out of your photographs, categorizes the photos for delivery to groups of users, and then simultaneously delivers the photos to your partners, customers, and agents at very high speeds. Our customers for this service include Sipa Press, AdMedia, Featureflash, Ace Pictures, and Splash News; they use this system to insure that their photos arrive first at their customers, for, as you know, speed is everything these days!

To replace the hosted photo website that Digital Railroad has provided, we also offer what we call, ‘Newscom Minisites’, using the same technology that more than 5,000 newspapers, magazines, broadcasters, and web sites depend upon every day to license images for their publications. You may already be familiar with Newscom as the one-stop digital media marketplace where users have instant access to almost 25 million rights-managed and royalty-free photos, graphics, illustrations, news stories, and features created by the world’s foremost publishers.
What you likely didn’t know was that more than 150 content providers use Newscom to reach a secondary market for sale of their content. Newscom is the digital media marketplace of the future—today.

A Newscom Minisite provides functionality similar to the Digital Railroad web portal in that we provide your customers password protected access to your photo archive where they can search, browse, and download photos and other multimedia content. We can also provide some customization of the front page of your Minisite by using your logo and contact information.

We would love to tell you more about our services and show you a demonstration, including a WebEx Internet broadcast in the next few days for those who have interest.

Don’t jump out of the Digital Railroad frying pan only to find yourself in the fire because you have chosen yet another unstable vendor.

To find out more about how Newscom and Mainstream can help, please send us an email at drroffer@newscom.com. Alternatively, please feel free to call one of us at the numbers provided below:

North and South America and Asia

Greg Weeks
Vice President, Mainstream Media Services
u.s.a. | work: +1.801.584.3989 | mobile: +1.801.915.2768

Bill Creighton
Managing Director, Newscom
u.s.a. | mobile: +1.703.850.5711
Europe, Middle East, and Africa

Richard Buckler
European Sales Director
u.k. | work: +44.1293.561120 | mobile: +44.7711.717935

Thanks, and we look forward to hearing from you.

Kind regards,

Your Friends at Newscom and Mainstream

While that's a nice offer, and one worth considering, it defines in very clear terms what Newscom is, and does. I can tell you that I have an account with Newscom, and I use it on a fairly regular basis, and it has generated revenue for me, and I think highly of its' services.

You may not be familiar with them, but you're familiar with Knight-Ridder, and Tribune Media? This press release informs you about just where their foundations lay and that were, in fact, a joint venture of Knight-Ridder and Tribune, before being sold to Mainstream Data last Summer. That's pretty solid backing, to be certain. So, when I learned of this possible outcome, I began to think about all of the good things to come of it. Let me walk you through a few of them:

1) I think the biggest benefit is that Newscom is a conduit for countless other image providers. Getty, UPI, AFP, Black Star, and many others have images that flow through their image pipeline. If you want to go check things out, visit: http://www.NewsCom.com, and click the "Login" link. NewsCom allows anybody to browse their images as a guest, (login: NCFOTONA, Password: Guest) and they provide the login information to do so without having to sign up. A search for "Palin" yields images from many sources, including, yes, AFP and Getty. In fact, check this link (once you're logged in), to see their partner sources, and above, right, you can see that I am listed, alphabetically right above Jupiter Images.

2) In addition, much of NewsCom is "push" technology. What that means is that those images are in browsers at newspapers and other content users, at their fingertips. To them, a search on their desktop is as if they are searching their own computer's hard drive, with instant results, and instant download/usability. Previously, DRR's Marketplace would only get a sale if someone knew about DRR, and navigated themselves to DRR, set up an account, and then began their search - that's more like "pull" technology.

3) NewsCom has a wide collection of images, just as Getty/etc does. Sporting events of all types, celebrity events, portraiture, and so forth. They have a fat pipeline of a wide variety of images, and they have numerous sources for those images. While they are seen as predominantly news, they have creative (i.e. non-editorial) images, as well as graphics, illustrations, cartoons, and so forth. Look around the publications you have nearby you right now - I'd bet that there is at-least one credit for NewsCom in it somewhere.

4) What NewsCom really doesn't have was the individual-photographer-archive capability that DRR has. Yes, NewsCom has their MiniSites, but the back-end and client services capabilities that the DRR architecture would offer would be great for them.

Ok, so that's all the good things - are there any bad? Well, it's not a bad thing, per se, but a question - what will the rate structures look like? I can say that my revenue from image licensing has been fair and reasonable, and I doubt that would change with the integration of the DRR platform and services, but it does remain to be seen what the rates will look like.

Additionally, it's clear that Newscom wants the architecture/intellectual property. It's unknown at this time was the final dissolution will be of the reported $120k in monies that are owed to photographers from images sold/licensed. I know that Stock Artists Alliance is on the case on this. That said, if Newscom is just looked at the assets, it's likely they won't take on the $120k owed photographers, but who knows. Perhaps there are images that were licensed, but the bills not paid, and Newscom may facilitate that final payment, if the balance due DRR/Newscom is still outstanding? We'll need to wait and see on this point.

Then, let's return to PhotoShelter. I think this is a potential problem for them. They closed the PhotoShelter Collection, and they have various degrees of image licensing available, and they use the FotoQuote pricing structure, modifiable by each photographer, to license images. Yet, you have to come to PhotoShelter to get the image - a form of "Pull" technology that requires the person needing the image to come to PhotoShelter. PhotoShelter's archives previously had a large number of sports images there, due in large part to the earlier partnership between them and SportsShooter, and the natural use of PhotoShelter by the large SportsShooter member community. While their image library has grown over the years, this puts them in a bit of a challenging position. Digital Railroad has a few features that PhotoShelter doesn't, but it suffered from a problematic user interface and client interface. PhotoShelter has a much more intuitive and easier to use interface, but is that enough of a value proposition to keep people?

Down the line, I think you will see a merger of both PhotoShelter and liveBooks, which will be a remarkable union for the photographer that is primarily an assignment photographer who has clients that need for an integrated website solution, client download capability, image licensing, and hardcopy prints. I don't expect NewsCom will get into the website business, and who knows about the ability to obtain an 8x10 of an image a client wants.

So, when will the NewsCom deal happen? It either will, or it won't, by mid-week, according to our sources. At this point, it's just a "Letter of Intent", and noting more. As a variation on what I wrote before - fasten your seatbelts, this is where the ride gets really interesting.

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